Last summer, the oil giant BP, the fifth largest oil producer in the world, called "peak oil," stating that the company "expects oil demand to peak next year and wind and solar capacity to grow rapidly in both of the two main scenarios," according to Reuters. That was a huge deal for a wide variety of reasons, but above all because it underlined the necessity to transition to cleaner energy sources. Other organizations, including the International Energy Agency (IEA), also predicted that fossil fuels would peak before 2030.

At the same time, oil companies have doubled down on their investment in petrochemical production for things like plastic goods. While the oil market is still huge, the petrochemical and plastics market is growing. According to data from The Business Research Company, the petrochemical market is expected to be worth $781.65 billion in 2025, and the global plastic market is expected to be worth $824.46 billion in 2030. By comparison, the oil and gas market is predicted to grow by more than $8 trillion in 2025 alone. So, will the net result mean reduced emissions from oil?

A Wider Pullback from Climate Commitments

While BP sold its petrochemical group to another oil firm, Ineos, in 2020, the company recently announced that it "reset" its green strategy to focus on profitable areas of the business, including an increased investment in oil and gas (over $10 bn per year, according to The Guardian), with 70% of that investment going to oil and 30% going to gas with the aim of creating 10 new significant oil and gas projects by 2027, and a total of 18 by 2030.

The shift with BP, in particular, is significant because the company had been the "poster child for Big Oil's efforts to decarbonise rapidly," according to Reuters. The company had put its money where its mouth was and invested heavily in things like offshore wind, solar, and hydrogen projects. COVID-19, the war in Ukraine, and technical problems, along with persistently high energy prices, has essentially pulled the legs out from under the plan. According to Reuters, BP plans to sell half its solar business, cancel plans for its hydrogen projects, and has already spun off its wind business.

BP isn’t alone in rolling back its climate commitments. Shell abandoned its 2035 emissions goals and weakened its 2030 goals, according to CarbonBrief. The company also recommitted to its investment in oil and gas, underlining the role of LNG (liquified natural gas) in the energy transition.

ExxonMobil has also quietly focused on expanding its petrochemical commitments–particularly in China. The company recently opened a huge petrochemical complex there and is considering an $8.6 billion plastics plant in Texas, right on the Gulf Coast.

Additionally, the Abu Dhabi National Oil Company (ADNOC) and Austria’s OMV recently merged their petrochemical groups to create Borouge Group International, which is currently valued at more than $60 billion and specializes in polyolefins, a kind of plastic that is derived from oil and gas. The merger makes the Borouge Group the fourth largest company in the global sector. Other Middle Eastern oil producers are making similar moves as the market for plastics is predicted to continue to expand rapidly, according to the Financial Times.

So Is It Really Peak Oil?

But if we’re approaching Peak Oil, why are oil companies investing so much in new oil infrastructure? One answer is the simple dollar. As we approach peak oil, the cost of extraction and refining will start to rise, cutting into profits for energy majors. These companies are looking for ways to continue to rake in record profits while cutting their costs, regardless of whatever climate impact that may imply.

Petrochemical and plastic production requires lower quality feedstock compared to things like gasoline and diesel. The production can use heavy and sour crude oil, both of which are much more sulfur-rich, making those particular products less desirable for refining. Many of the refineries already integrate petrochemical units to extract those valuable components for plastic and petrochemical production. They also use refinery residues and naphtha for the process, which are lower-value byproducts of refining. These lower-quality crude and refining byproducts mean that there are lower input costs, which oil companies like. When combined, these byproducts also create high-value outputs, meaning that the companies can charge more for them and make more profit.

It’s also important to note that the move to petrochemicals and plastics has been happening for a while–even though it's grabbing headlines now. Axios reported that the oil companies were ramping up petrochemical investment in 2019, well before the chaos of COVID-19 upended world markets.

This paradoxical approach could have multiple impacts on the market and the climate. For one, there’s the huge environmental impact that production and disposal of plastics has on the climate. Everything from air and water quality to greenhouse gas emissions will be affected. Second, a lot of investment is being made in the space right now, and that could backfire if, say, the US goes into a recession as a direct result of Trump’s irresponsible tariffs and threats. If society decides that we don’t want plastic goods anymore, as scientific evidence mounts that it's increasingly hurting our health and our planet, there could be a glut of these plants with no demand for their output. There are also increasingly advanced changes in recycling, which will help cut down on the amount of plastics we need (and use) in the market. There is also the simple cognitive dissonance of saying that we're approaching peak oil at the same time that oil companies are doubling down on petrochemicals and plastics and retreating from climate goals. The move could further erode public trust, which, ultimately, might be a good thing for the climate.

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